PITTSBURGH-Don't trash the insulation or double-paned windows yet. Those energy efficient items can still help to save energy and lower the carbon emissions that result from making all the goods and services we consume.

Carnegie Mellon University's Ines Azevedo and Brinda Thomas report in a pair of papers (part 1 and part 2) in the Ecological Economics journal that the once popular "rebound effect" in energy savings or carbon emissions that occur when homeowners buy a hybrid vehicle, switch to a CFL light bulb, or make any other energy efficiency investment is modest in comparison to recent reports.

Since all goods and services require energy for their production and use, some analysts have claimed that the rebound effect could be so large - more than 100 percent - that energy efficiency incentives and policies may not contribute to air pollution and climate change goals.

"What we found is that even after households re-spend their budget savings on more energy or other goods and services, this contributes to a modest 15 to 25 percent rebound effect for the average household," said Azevedo, an assistant research professor in the Department of Engineering and Public Policy and executive director of CMU's Center for Climate and Energy Decision Making (CEDM). This means that energy efficiency investments lead to 75-85 percent of the environmental benefits found by studies that ignore re-spending behavior and rebound effects.

Thomas, a CEDM postdoctoral fellow, argues that the rebound effect can be beneficial if energy efficiency policies, such as Energy Efficiency Resource Standards that are now in place in 20 states, were complemented with climate policies. "With a carbon tax or cap and trade policy in place, this would ensure that society as a whole benefits when households spend the savings from an energy efficiency investment," Thomas said.

The team's research is part of ongoing work at the CEDM, which is dedicated to helping consumers and industry better handle uncertainty when it comes to issues involving global climate change and energy.